The Middle East crisis has applied brakes on foreign portfolio investments in India. The inflow of FII funds so far in 2003 has fallen by 51.4 per cent when compared to the same period in 2002. Cumulatively, FIIs have put in a net Rs 1,711.80 crore (or $ 356.60 million) in both equity and debt markets till March 13, 2003. This is lower than the Rs 3,524.20 crore (or $ 729.70 million) infused in the corresponding period of last year. “In the wake of the expected US-Iraq war, foreign institutional investors (FIIs) are adopting a wait-and-watch approach,” said stock dealer Pawan Dharnidharka. Cumulatively, FIIs put in a net Rs 153.70 crore in the current month (till March 12, 2003). In February 2003, they had added a net Rs 378.60 crore, which was substantially lower than their inflow of Rs 887.90 crore in January this year. In fact, geo-political tensions have weighed down the market considerably since February 28, 2003. Last week, too, the market fell, and this, amid high volatility almost each day. The barometer 30-share Bombay Stock Exchange (BSE) sensitive index (Sensex) lost 44.82 points, or 1.4 per cent, to settle at 3,108.24 in the truncated week ended March 13, 2003. The S&P CNX Nifty Index of the National Stock Exchange breached the 1,000 level. It shed 17.45 points, or 1.7%, to settle at 999.65. The much-feared war, that threatens to break out soon, has been dominating market sentiment not only in India, but the world as well. As Iraq is a leading oil exporter, marketmen are obviously worried that war will hamper oil supplies and prompt an oil price spiral. “It is a historical fact that rising oil prices send economic activity in reverse gear. If war breaks out and lasts for a prolonged period the already fragile economies of the world like India would be hurt further,” said stock dealer RA Podar.
